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Self-employment: Influence of Tax Incentives and Income Underreporting

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  • Adam Adamczyk

Abstract

The aim of the article is to answer the question whether the tax benefits that can be obtained by the self-employed in Poland influence the decision to start their own business. In the study, the EUROMOD microsimulation model is used to determine tax benefits from self-employment. The estimated tax benefits are then used in a probit regression to explain the probability of self-employment. The survey is carried out for both original EU-SILC data and adjusted data, assuming that the income reported by the self-employed is underreported. The results of the survey based on the original data indicate that taxpayers make irrational decisions about taking up self-employment. This is because as the benefits of self-employment increase, the probability of self-employment decreases. After ad-justing the data on self-employed income with the underreported income, the results of the analysis lead to the opposite conclusion.

Suggested Citation

  • Adam Adamczyk, 2021. "Self-employment: Influence of Tax Incentives and Income Underreporting," Prague Economic Papers, Prague University of Economics and Business, vol. 2021(2), pages 171-188.
    • Handle: RePEc:prg:jnlpep:v:2021:y:2021:i:2:id:766:p:171-188
    DOI: 10.18267/j.pep.766
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    More about this item

    Keywords

    self-employment; taxation; underreporting;
    All these keywords.

    JEL classification:

    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • L53 - Industrial Organization - - Regulation and Industrial Policy - - - Enterprise Policy

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